Site Meter An Optimal World: Market Research Vs Natural Selection

Thursday, November 6, 2008

Market Research Vs Natural Selection

Companies, throughout the last century, placed a premium on market research. Specialized survey techniques were developed to understand the market demand for a product. Focus groups were created and millions of dollars were spent to understand the preferences of the customers.

Importance of market research for the success of a product cannot be overemphasized. However, the current market research techniques are running the risk of quickly becoming outdated with the dawn of internet and internet commerce. A much more powerful methodology is fast replacing the current market research techniques. It is what Darwin called "Natural Selection".

Let's take www.digg.com or www.stumbleupon.com for example. Anyone can post anything in this world. Millions read it. If enough people find the post worth its ink, some of them will take time to go digg it. On digg.com, the ones with the highest number of diggs rise to the top. In other words, these articles naturally selected themselves to come on top of the digg homepage. As a result, they are more likely to be viewed and therefore more likely to be digged. The really poor ones will go all the way to the bottom of the page and eventually go out of sight.

This phenomenon is not unique to articles. More and more products are being created using this natural selection process. www.threadless.com is one such example (This reference has been directly lifted from the book CrowdSourcing by Jeff Howe... by the way I strongly recommend this book). Once people vote on the designs for t-shirts, the winning designs are produced and sold on this website. The fact that a design got the most votes from the customers of the website implicitly means that more customers like it and therefore more customers will buy it. There is no need for any other kind of market research.

Random sampling, focus groups, extensive surveys are all good and have their place but they can not compete with natural selection. I think this will be the future of market research.

1 comment:

Ram said...

Goutham,

I don't disagree with what you are calling the 'Natural Selection' process.

But specifically, Digg still has problems that are very relevant and haven't yet been overcome. The most persistent is the 'rich-get-richer' phenomenon, where an article stays around far too long.

The book (crowdsourcing) also goes on to mention some of these problems.

Here's a good post on a few problems with Digg.
(http://www.populartechnology.net/2006/07/problems-with-diggcom.html)
This guy even keeps a list of posts that deal with this at the bottom.